Which expression gives average fixed cost (AFC)?

Which expression gives average fixed cost (AFC)?

• A. AFC = TC/OUTPUT
• B. AFC = FC/OUTPUT
• C. AFC = VC/OUTPUT
• D. AFC = FC*OUTPUT

Answer: (B)

Average fixed cost tells you how much of the fixed cost is assigned to each unit produced. Since fixed cost doesn’t change with output, it gets spread over more units as production grows, so AFC falls as output rises. It is calculated as AFC = FC / Q, where FC is total fixed cost and Q is the quantity produced. For example, with a fixed cost of $100, producing 20 units gives AFC = 100/20 = $5 per unit, while producing 100 units gives AFC = 100/100 = $1 per unit. Dividing total cost by output gives average total cost, not just fixed cost; dividing variable cost by output gives average variable cost; multiplying fixed cost by output isn’t a standard per-unit measure.

Average fixed cost tells you how much of the fixed cost is assigned to each unit produced. Since fixed cost doesn’t change with output, it gets spread over more units as production grows, so AFC falls as output rises. It is calculated as AFC = FC / Q, where FC is total fixed cost and Q is the quantity produced. For example, with a fixed cost of $100, producing 20 units gives AFC = 100/20 = $5 per unit, while producing 100 units gives AFC = 100/100 = $1 per unit. Dividing total cost by output gives average total cost, not just fixed cost; dividing variable cost by output gives average variable cost; multiplying fixed cost by output isn’t a standard per-unit measure.